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European Central Bank prepares to open business to closer scrutiny

EUROPEAN Central Bank governors are set to publish summaries of their monthly meetings and regular economic reports as part of a strategy to make their decision-making ‘transparent’ to the markets, say senior monetary officials.

Although this falls short of the demands of the European Parliament, such glasnost would be unprecedented for many bankers on the ECB’s 17-member governing council and goes much further than observers had expected from Wim Duisenberg.

The newly-installed Dutch president of the bank has long stated his opposition to the kind of transparency practised at the US Federal Reserve and the Bank of England, where minutes of policy-making meetings together with voting records are published after six weeks. During his confirmation hearings at the Parliament last month, Duisenberg said full minutes would not be released for 16 years.

However, a report from a working group established by Duisenberg when he was head of the ECB’s precursor, the European Monetary Institute, calls on the new bank to make its decision-making as open as possible short of US/UK-style transparency.

The group’s recommendations, which are expected to be adopted by the governing council at its second meeting next month, would establish a system of reporting aimed at making monetary policy more “predictable”.

Most of the ten meetings of the council would be followed by a short but “comprehensive” summary of their deliberations, although the policy positions of individual governors or executive board members would be kept secret.

The council would always publish explanations of why it had changed interest rates, but would also consider setting out the reasons why rates had not moved if a policy change had been anticipated by the markets.

The ECB would ape the German Bundesbank by publishing monthly reports on the economic background to its decisions to raise or lower interest rates. These would probably include chapters on developments in the money, share and bond markets, as well as on general economic conditions and trends in the balance of payments.

The Maastricht Treaty obliges the council to publish a report every three months, allowing Duisenberg to import a practice from his 15 years at the Dutch central bank. This will be a detailed quarterly bulletin outlining inflationary trends and containing a statement from the president, articles on key issues and a copious statistical annex.

MEPs want Duisenberg or executive board member Otmar Issing, who looks set to become the ECB’s chief economist, to present this report to Parliament and face scrutiny by its economic and monetary affairs committee.

They have asked Duisenberg to appear before the committee four times a year and say this would be an ideal opportunity.

Leading MEPs will begin negotiations next week on how to overhaul the committee to provide effective scrutiny of the bank.

Socialist Group policy coordinator, British Labour MEP Alan Donnelly, is backing a proposal to beef up the secretariat of the monetary subcommittee, split it from its parent panel and turn it into a fully-fledged banking committee. He is to meet Socialist Group leader Pauline Green, monetary subcommittee chairwoman Christa Randzio-Plath and the senior Socialist on the parent economic committee Giorgos Katiforis to decide whether to pursue these reforms with the European People’s Party.